4 Trade

4.1 Importance of Trade

In 2000, the total trade in goods and services in Latin America comprised 37% of the current GDP, and the total exports of goods and services12 comprised 20.66% of GDP. The total imports of good and services comprised 21.31% of GDP. This tendency is also observed in the total the trade in goods of Latin America and the Caribbean (LAC) where the total trade represented, 37.7% of LAC GDP, the total exports of goods and services was 17.3% of LAC GDP and the value of imports of good and services 18.3% of LAC GDP (World Bank, 2002).

The relative importance of trade in each of the Latin American countries is illustrated inTable 6. The five largest economies13 in Latin America are namely: Brazil; Mexico, Venezuela, Colombia (G-3); and Chile. Trade in goods, as a percentage of GDP comprises 18 to 61% in the aforementioned economies. The most remarkable case in this group is Mexico with 60% followed by Venezuela by 40%. Small economies such as Guyana, Suriname and Nicaragua have more than 100% of trade respect to their GDP, possibly because these are “island economies” which depend almost entirely on imports of food and other goods as it is the case of Guyana. These five countries are also the main traders in Latin America, where Mexico accounts for 50% of the total LA trade; Brazil 16% and Argentina, Chile and Colombia collectively , 16%.

4.2 Importance of forestry sector
for trade in Latin America

The five major economies of the region and 11 of the 20 countries analysed in this document are part of ALADI (Latin American Integration Association). Therefore, this group will be used as an indicator for the whole of Latin America. Forestry is not a major trade sector for the majority of ALADI countries; as it represents 1,7% of ALADI total exports for 2000 and for the period 1996-2000 and 0,7% and 0,6% of imports for the same periods. However, forestry is an important export sector for Chile and Paraguay, representing 9,7% and 7,4%, respectively, for the period 1996-2000 (Table 5).

Brazil, Chile, Paraguay, Ecuador and Bolivia are net exporters of forest products (1996-2000) (ALADI, 2002). There is a great difference between Brazil and the rest of ALADI countries in terms of value of exports for the same period; Brazil alone exports US$ 2 250 million or 48,8% of ALADI forest exports. The second major player in forest exports is Chile with US$ 1593 million or 34,5%. Mexico and Argentina are the next two main exporters with 5,7% and 4,4% respectively. The rest of countries account for 6,6% of ALADI forest exports.

Mexico, Colombia and Venezuela are net importers for the period 1996-2000 (ALADI, 2002). Mexico accounts for 56,4% of ALADI forest imports, followed by Brazil, Argentina and Venezuela, 15%, 9,8% and 7,5% respectively. The rest of countries account for 11,2% of ALADI forest imports.

Table 4 Importance of trade for Latin America, 2000

Country

Exports of goods and
services(% of GDP)

Imports of goods and
services(% of GDP)

Trade in
goods(% of LA Trade in goods)

Trade in goods (%
GDP)

Trade in
goods(US$ billion)

Trade in goods and
services(US$ billion

Trade in goods and services
(% GDP)

Argentina

11

11

7

18

51.30

63.3

22

Belize

50

68

0.1

78

0.61

0.91

117

Bolivia

18

25

0.4

36

2.98

3.53

43

Brazil

11

12

16

19

113.00

138

23

Chile

32

31

5

51

36.20

44.2

63

Colombia

21

20

4

30

25.20

34.3

41

Costa Rica

48

46

2

77

12.30

15.0

94

Ecuador

42

31

1

61

8.31

9.96

73

El Salvador

28

43

1

59

7.82

9.28

70

Guatemala

20

28

1

39

7.46

9.10

48

Guyana

96

111

0.2

173

1.23

1.47

207

Honduras

42

56

1

71

4.20

5.86

99

Mexico

31

33

50

61

352.00

372

64

Nicaragua

..

..

0.3 a

101

2.09

2.44 a

118

Panama

33

38

1

43

4.29

7.13

71

Paraguay

20

35

0.4

40

3.04

4.18

56

Peru

16

18

2

30

15.80

1.81

34

Suriname

17

17

0.1

116

0.98

0.29

35

Uruguay

19

21

1

29

5.86

8.02

40

Venezuela

28

16

7

40

48.20

54.3

45

Latin America

20.66

21.31

100

37

702.00

801

42

Source: World Development Indicators,
2002.a Calculated with GDP from 1998.

Table 5 Forestry sector participation in forest exports and imports

Country

2000

1996-2000

Exports

(%)

Imports

(%)

Exports

(%)

Imports

(%)

Argentina

0,9

0,7

0,8

0,7

Bolivia

2,5

0,3

3,8

0,2

Brazil

5,1

0,5

4,3

0,5

Chile

10,6

0,3

9,7

0,2

Colombia

0,2

0,9

0,1

0,6

Ecuador

1,3

0,3

1,5

0,3

Mexico

0,1

0,7

0,2

0,7

Paraguay

7,7

0,1

7,4

0,0

Peru

1,0

0,6

0,8

0,5

Uruguay

2,2

0,9

1,8

0,9

Venezuela

0,0

1,1

0,0

1,0

ALADI

1,7

0,7

1,7

0,6

Source: (ALADI, 2002)

Table 6 Forest trade in ALADI countries, average
1996-2000

Country

Exports(US$ 1000)

Imports(US$ 1000)

Balance(US$ 1000)

% ALADI
exports

% ALADI
imports

Argentina

202 153

177 416

24 737

4.4%

9.8%

Bolivia

49 850

3 830

46 020

1.1%

0.2%

Brazil

2 250 565

273 468

1 977 097

48.8%

15.0%

Chile

1 593 443

35 002

1 558 441

34.5%

1.9%

Colombia

13 572

84 417

- 70 845

0.3%

4.6%

Ecuador

71 292

12 331

58 961

1.5%

0.7%

Mexico

260 754

1 027 260

- 766 506

5.7%

56.5%

Paraguay

71 889

1 182

70 707

1.6%

0.1%

Peru

52 659

35 031

17 628

1.1%

1.9%

Uruguay

44 511

32 190

12 321

1.0%

1.8%

Venezuela

2 610

135 638

- 133 028

0.1%

7.5%

ALADI

4 613 298

1 817 765

2 795 533

100.0%

100.0%

Source: (ALADI, 2002)

4.3 Trade
partners

LAC main trade partners are the US and Canada who have
increased their share of LAC trade from 45% in 1991 to 57% in 2000. The EU was
the second trade partner in 1991 but in 2000, LAC itself became its second main
partner revealing that intra-LAC trade has grown faster than trade with the EU.
However, as showed in Figure 15, Table 7 , total LAC trade
has increased by 2,6 times between 1991 and 2000. The above trends differ from
those of MERCOSUR who have stronger trade links with Europe. In general, trade
flows between the European Union and Latin America and the Caribbean grew 60%
during the past decade, rising from US$ 50.6 billion in 1991 to nearly US$ 81
billion in 2000. LAC exports to the EU rose 25% during the 1990s, from US$ 28.5
billion in 1991 to US$ 35.6 billion in 2000. In contrast, EU exports to LAC grew
by 105%, from US$ 22.1 billion in 1991 to US$ 45.3 billion in 2000. However, the
growth rate of trade between LAC and the US and Canada was much more
significant, 230% during the 1990s and US$ 396 billion in 2000. (IDB, 2002)

Exports towards the US and Canada have also increased
dramatically between 1991 and 2000, both in relative (+19%) and absolute terms
(+ US$ 151 880 million). EU share of LAC exports has decreased from 21% to 11%;
Asia share from 8% to 4% and the rest of the world (ROW) from 13% to 7%.
Intra-LAC exports have grown by 1% for the same period (Figure 16).

LAC imports from US and Canada, Asia and intra-LAC have
increased from 1991 to 2000 in both relative and absolute terms, and imports
from EU have decreased in relative terms only, from 17% to 13% (Figure 17
Origin of LAC imports, 1991 and 2000) and increased in absolute terms from
in about US$ 23 213 million, this means that they have more than doubled in 2000
respect to 1991 Table 7 .

4.4
Structure of trade

LAC exported mainly manufactured goods, fuels and food
items in 1991 and 2000 (Table 8). The exports towards Asia showed a different
structure, the main exported goods were manufactures and ores and metals. There
has been an increase of manufactured goods in the structure of LAC exports
towards the EU, the FTAA, the LAC itself and notably, towards US and Canada,
where the relative value of manufactured goods to this destination group rose
from 51,7% to 70,6%.

Table 8 Structure of international trade of Latin America 1991- 2000 (% of
total trade to destination group)

4.5 Trade agreements

4.5.1
Multilateral trade agreements

All of the Latin American countries analysed here are
members of the World Trade Organization (WTO) and the General Agreement on Trade
and Tariffs (GATT)15.
These agreements set the rules for international trade. Other two important
agreements which have a direct relation with animal and plant species trade are
the Convention on International Trade in Endangered Species of Wild Fauna and
Flora (CITES)16 and the
International Tropical Timber Agreement (ITTA)17 (WTO, 2000).

Problems are likely to occur when relevant agreements
say signatory countries should take action against non-signatory countries. This
could create problems with non-signatories within and outside the region, e.g.
for Paraguay, a non-signatory of ITTA. According to the WTO, if this kind of
problem occurs, then the principle of lex specialis
or the more specialized treaties should prevail. This is a matter of concern for
the Trade and Environment Committee (CTE) of the WTO. (WTO, s/f)

Within the WTO, the Agriculture Agreement allows
governments to support their rural economies, but preferably through policies
that cause less trade distortion. Domestic policies that have a direct effect on
production and trade have to be cut back according to this agreement. Also,
developing countries do not have to cut their subsidies or lower their tariffs
as much as developed countries, and they are given some grace period to complete
their obligations. Since the new rule for market access in agricultural products
is “tariffs only”, the WTO members have to reduce their subsidized exports.18

From these agreements, the SPS and the TBT are of
special interest for the future of forest products trade since they could
represent non tariff barriers.

4.5.2
Regional and sub-regional trade agreements

The Latin American Integration Association (LAIA/ALADI)
is composed of 12 Latin American countries: Argentina, Bolivia, Brazil, Chile,
Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay and Venezuela since 1980 and
Cuba since 1999 (SICE, 2002). The LAIA fosters trade through sub-regional and
regional mechanisms of Regional Tariff Preferences
(RTP) which countries grant one another a reduction on the tariff applicable to
its members; trade recovery and expansion and duty free concessions to
less-developed members (Appendix 7).

Sub-regional associations such as the Customs Unions of
the Andean Community (CAN), the Southern Common Market (MERCOSUR), the Central
America Common Market (CACM) and the Caribbean Community Common Market (CARICOM)
have gone far beyond the LAIA RTP. They look for “deep integration”. This means
not only stimulating trade but also promoting policy related access to the
market services, competition policies and regulatory environment (CEPAL/ECLAC,
2002).

A general
overview of the main trade agreements in Latin America (Table 9) leads to the
conclusion that its main impact has been the increase of trade, in all of the
cases, the value of exports within trade associations (intrasubregional) and
with LAC (intraregional) and the world (total) has increased from 1990 to 2000.
The relative value of exports has also increased, except for CARICOM, where the
relative value of exports towards LAC decreased while the total value increased.
The increase in trade can be attributed to a number of factors including the
reduction in the cost of communication and transportation, as well as other
socioeconomic factors which have lead to higher worldwide disposable income
(DOTD, 2001).

A negative impact of trade agreements is the increase of
vulnerability to intraregional trade and external crisis. For example, the
recent Argentinean crisis caused a decrease of 6% in Brazil and two thirds of
Paraguay exports to Argentina during the first months of 2002 (Tomaselli, 2002).
The US recession has also caused a dramatic decrease on Mexican exports in 2001
and the Asian crisis (1997) also caused a dramatic decrease in trade volume in
1998 (CEPAL/ECLAC., 2000).

North South agreements (Table 12 ) have a direct
relation with the increase of trade. For example, between 1991 and 2000 trade
increased from US$ 22.7 billion to US$ 36.3 billion between EU and MERCOSUR.
Similarly, EU exports to MERCOSUR increased from US$ 7.9 billion to US$ 19
billion and MERCOSUR exports to EU from US$ 14.8 billion to USD $ 17.3 billion.
The NAFTA has also had a major impact for the second main economy of Latin
America, Mexico. However, North-South agreements could not produce important
advances in the regional negotiations if they are not significant changes in the
multilateral side e.g. respect to subsidies and agriculture protectionism or
antidumping measures. (CEPAL/ECLAC. Baumann, 2002).

Free Trade Area of the
Americas

The FTAA could turn into the biggest free trade area
with 800 million people. However, it has some detractors as the Worker’s Party
(PT) in Brazil has argued that this agreement is not a free-trade agreement but
a process of “economic annexation” of Latin America by the United States. The
biggest striking point for the FTAA is agriculture. The Americas have insisted
that tariff reductions during the transition period towards full free trade
should vary country by country. However, in global trade negotiations, the “most
favored nation” principle normally applies, meaning that market access offered
to one country must be offered to all (The Economist, 2002).

The Andean Community (CAN) and MERCOSUR have decided to
have one voice in the last FTAA negotiations, therefore strengthening their
position. The FTAA has also increased the interest of the EU to sign treaties
with Latin America as the EU-Mexico, EU-Chile and EU-MERCOSUR agreements
(CEPAL/ECLAC. Baumann, 2002).

Apart from trade, some issues within the FTAA are
services, investment, competition, policy and intellectual property, business
facilitation schemes, labor and environmental issues.

4.6 Trade
barriers

Trade barriers create a distortion of relative prices
across countries and consequently, distort individual consumption patterns and
lower individual welfare (DOTD, 2001). Formal institutional measures affecting
trade have traditionally been divided in two categories: Tariffs and non-tariff
measures (also called non-tariff barriers). There are also some restrictions
related to environmentally oriented concerns called impediments to trade e.g.
CITES. (Bourke, 1998)

4.6.1
Tariffs and Duties

Both, taxes and duties19 have similar effects. They raise the
price of goods and allow certain domestic producers to produce at higher levels.
Therefore, resources may be diverted from industries for which a country has a
competitive advantage to industries for which the country does not have a
competitive advantage. Tariffs could also be tricky since some importers could
take advantage of exceptions as “zero tariff” to import other goods under the
exempted goods denomination.

In the short run, the removal of import barriers lessens
forest cutting if increased imports of finished or semi-finished products
substitute for domestic processing of logs. This favors consumers, but displaces
processing workers. Often, import liberalization generates a demand for new
processing technology to compete with the inflow of imports (J.Laarman, 1999).

Tariffs on wood products

Chile and Bolivia have a uniform import tariff. Chile
applies 7% for wood products and Bolivia, 10%. Peru has the most complex tariff
structure, with a clear tendency to allocate exceptions for each item applying a
tariff of 12%. This strategy could sound logical if the goods are able to be
well differentiated at within subcategories. However, a clear example of the
disadvantage of this system is distinguishing between different kinds of pulp
for paper.

MERCOSUR show a very similar external tariff structure.
Remarkable exceptions are found in the in the casks, barrel, vats and tubs of Quercus spp (Section 41.16), where Argentina applies 0%
percent and the rest apply 3.5% tariff. Newsprint is an exception for Brazil,
which applies 6% and 12% instead of the 7.5% and 12% of the rest of MERCOSUR
countries. Imports of rolls of cigarette paper also have a different tariff for
Paraguay (8%) where the other MERCOSUR countries apply 13.5%. Paraguay also
tries to protect its internal industry for furniture, stationery and packing
containers, applying an extra 10% on the tariff.

Mexico shows a general higher tariff on wood products
than the rest of Latin American countries analysed here: 13%, 18% and 23% for
the goods in Chapter 44 (of the Harmonized System), with the exception of
barrels of Quercus spp. (0%); 3%, 5% and 13% for
pulp and waste paper (chapter 47); 13%, 18%, 20% and 25% for the goods in paper
(chapter 48). In general, the lowest tariffs of the whole group are for pulp and
waste paper and the highest for furniture. Moreover, most of the MERCOSUR
countries imports are fully liberated. This is not the case of capital goods,
though. This is also the case for CAN countries.

Tariffs on capital goods

Capital goods (BK) have been specially classified by
some countries and lower tariffs are applied to them, as it is the case of
Argentina, which applies 0% tariff for dryers and machinery for making pulp and
paper, chainsaws and presses for the manufacture of particle board or
fibreboards. On the other hand, it applies a high tariff on tractors and
trailers (28.4%). Brazil also tries to protect its own vehicle industry applying
tariffs as high as 35%.

Bolivia applies three tariff levels, 0%, 5% and 10% for
capital goods, 0% for machinery for making pulp and paper, chainsaws, tractors
and 10% for its parts; 5% for semi-trailers, dryers and mother vehicles for the
transport of goods between 6 and 20 Tons. Mexican tariffs are in the range of
13% to 23% for capital goods, except for machinery for making pulp and paper and
dryers where the tariff is 3%. Chile applies 7% for all capital goods.

A general conclusion of the analysis of the tariff
structure is that countries as Argentina and Bolivia are stimulating pulp and
paper industry, through the elimination or reduction of tariffs. Some countries
such as Brazil and Mexico are protecting their vehicle industry allocating high
tariffs for their imports. Also, Chile has a strong forestry oriented industry
and applies a common tariff for their forestry-related imports (wood, pulp and
paper and capital goods).

MERCOSUR has deadlines to adjust their exception on
capital goods and converge into a Common External Tariff (CET). Paraguay and
Uruguay will do so on 2006 whereas Argentina and Brazil are applying it since
2001(Table 13). However each country has sensitive
goods which are exempted and countries are allowed to apply their own import
tariff.

Table 13 MERCOSUR Common External Tariffs on capital
goods

Date

Action

Country

1.1.2001

CET 14% for Capital goods

Argentina and Brazil

1.1.2006

CET 14% for Capital goods

Paraguay and Uruguay

1.1.2006

CET 16% for Informatics and
Telecommunications

All countries

1.1.2006

End of convergence of AEC from the Exceptions List

Paraguay

Source: Secretaría General del MERCOSUR.
(MERCOSUR, 2001)

Non tariff measures

These include a set of different rules and procedures,
ranging from health and technical standard to measures influencing prices. They
are much more complex to recognize and therefore, difficult to assess than
tariffs especially in quantitative terms (Box 1).

Other measures

From the large list of other measures that limits trade
(Box 2), subsidies are the one with the biggest consequences for forestry.
Subsidies are provided by a government to provide financial benefits on the
production, manufacturing, and distribution of goods or services to foreign
markets. They distort the relative prices of goods and individual consumption
patterns. It is an anti-competitive practice that restricts the ability of
foreign producers to compete in a worldwide market. They are widely used in the
agriculture industry (DOTD, 2001).

Subsidies applied to agriculture by the United States
have a direct impact on exports of the FTAA countries and also a delay on
multilateral negotiations of agricultural products. (CEPAL/ECLAC. Baumann,
2002). One of the major impacts of US subsidies on agriculture e.g. through
preferential loan agreements and tariff-rate quotas on sugar (Groombridge, 2001)
is that as they lower the prices of commodities, they lower farmer’s incomes in
developing countries and therefore their “willingness to invest” in agriculture.
To make agriculture profitable in the short term, they need to use extensive
practices, i.e. forest clearing by slash-and-burn. EU subsidies through the
Europe’s Common Agriculture Policy (CAP) which favours EU farmers, is seen as
many LA countries as a major obstacle for some of their most competitive
agricultural products. (IDB, 2002). Colombia applies “industrial” subsidies to
exports and has been allowed by the OMC to keep them until 2006 (CAN, 2002).
America’s subsidies to its soya farmers hurt Brazil and Argentina. Many other
Latin American farm exports, such as sugar, cotton or orange juice, are
politically sensitive in the United Stated. What is worse is that the United
States is already trying to wriggle out of an agreement made with Mexico under
the North American Free Trade Agreement that allows unrestricted sugar imports
by 2008. (The Economist, 2002).

Export restrictions

Export restrictions are also of considerable
significance for trade. Export controls include total bans, export quotas, or
selective bans based on species. They may be imposed primarily as a revenue
generating instrument, especially if this method of collection is more efficient
than other instruments to capture resource rent (Bourke, 1998). Peru tried to
apply an export restriction on S. macrophylla in
2000; however, the great amount of logs that harvest before the ban was so high
that an emergency decree approved the immediate export of these logs. Of course,
many took advantage of the decree and exported even S. macrophylla logs.

Box 1. Non tariff measures

Quotas: Is also
referred as a quantitative restriction, is a policy tool to restrict trade
by placing a ceiling on the amount of a product that can be imported
during a given period. (DOTD, 2001). The EU imposes quotas on board and
panel products and has also tariff quotas or tariff ceilings on newsprint,
fibre-building boards, builder's woodwork and some furniture items that
could affect their forest product trade with Latin America.

Technical standards and
plant health standards:

Environmentally related
technical standards: Some of these are specified on the basis of the
physical characteristics of products and the material used in their
manufacture; other related to the production processes themselves e.g.
restrictions on wood panels which use formaldehyde glues, a glue with
human health risks; controls of processing methods (pulp bleaching); and
packaging regulations.

Phytosanitary
regulations: Trade in NWFPs such as rattan, rubber, Brazil nuts, oils
and medicines, seems more likely to be affected by health standards and
phytosanitary rules since many are used in food or pharmaceutical
industries. A United States District Court has applied restrictions on the
importing of logs from Chile, New Zealand and Siberia. But it is
discriminatory since it doesn't include imports from Canada and Mexico,
for example in/since 1997.

Source: (Bourke, 1998)

Box 2. Other measures

Import licensing:
Import licensing is used for a variety of reasons including statistical
purposes, monitoring and quota control. They may be legitimate
requirements or may be misused and act as barriers to trade.

Customs procedures:
Customs procedures can present difficulties, particularly to smaller
firms. Problems include the complexity of documents, difficulty to obtain
necessary authorizations, complex inspection procedures, etc. An indicator
of customs efficiency which has not been studied is the time that
determined forest products and capital goods last to be taken out from
customs and the cost of it (extra-tariff cost).

Domestic-content
rules: They require a certain portion of a product to be made
domestically. This tactic is often used by the automobile industry. (DOTD,
2001).

Exchange Rate
policies: In order to protect the domestic industries, third world
countries will often create exchange rate barriers to reduce the influx of
foreign currency, which reduces the ability of a country to purchase
imports. Therefore, residents will be forced to purchase goods from
domestic producers which create an artificially diversified domestic
economy. (DOTD, 2001)

Dumping Policy:
Dumping occurs when the producer sells a product in a foreign market at
prices below that of their own domestic market. I could be a strategy of a
producer or it could be the result of foreign government subsidies. (DOTD,
2001)

Price bands: Price
band is a policy instituted by the government that calculates the price
range of a product from a time series analysis of international prices for
that product. These are used to restrict the importation of agriculture
products.

Impediments to
trade

Bans and boycotts

This could be done through local authority restriction
or “buyers groups”. Examples of these are a proposal in NY city (1997) to ban
the purchase of tropical hardwoods and products in future city contracts unless
they are certified by the FSC; and the “buyers groups” promoted by WWF in the
United Kingdom that have committed themselves to buy only products approved by
FSC (Bourke, 1998).

Certification of forest
products

Interest for forest certification or eco-labelling is
greatest in important importing countries in Europe as Germany, the Netherlands
and the United Kingdom, where environmental groups are active and where some
retails interest see a potential market advantage from providing certified
products (Bourke, 1998). The WTO points that labelling requirements and
practices should not discriminate between trading partners or between
domestically-produced goods and services and imports.

Fair Trade Practices

The CITES

CITES regulate wildlife trade through controls and
regulations on species listed in three appendixes:

• A1) includes species endangered due to international
trade. Trade in specimens of these species is permitted only in exceptional
circumstances.

• A2) includes species which require strict regulated
trade based on quotas and permits to avoid its unsustainable use.

• A3) contains species that are subject of domestic
regulation by who has asked other CITES Parties for assistance in controlling
the trade. (IISD, 2002)

Swietenia humilis and Swietenia mahogoni (or S. mahogani) are listed in Appendix II of the CITES
(CITES, 2002). Swietenia macrophylla (Bigleaf
mahogany) was listed in Appendix III; however, Nicaragua supported by Guatemala
suggested its inclusion into Appendix II during the 12th meeting of the Conference of the Parties (COP) in
Santiago de Chile. This amendment was adopted on the 12th of November of 2003, after one year of the end of
the COP (IISD, 2002). The listing in Appendix II means that range states will
now have to provide export permits for shipments of logs, sawn wood, veneer, and
plywood.

4.7 Trade
Outlook

Trade liberalization and the expansion of trade
agreements within and outside of Latin America will continue for at least the
next decade and they will be a significant factor of economic growth. Regional
trade integration through organizations such as MERCOSUR and the likely
conclusion of a FTAA will boost trade and therefore income growth in Latin
America.

Currently, NAFTA is the biggest free trade area in the
continent. Although it does not include only Latin American countries, the
impact on Mexico, the second main economy in Latin America is remarkable. Mexico
has also subscribed a commercial agreement for preferential access to China, a
key world market (CEPAL/ECLAC., 2002).

New trade agreements are to be signed or put into force:
By 2004 Chile and Peru will have a free trade area; by 2005, Peru will have a
free trade area with CAN; by 2006, Chile will have a free trade area with
MERCOSUR and Bolivia will do so by 2007. It is important to remark that both
Chile and Bolivia have already signed economic complementation agreements with
MERCOSUR. By 2007, the G-3 (Mexico, Colombia and Venezuela) will have a free
trade area. By 2009, Mexico and Bolivia will have a free trade area (ALADI,
2002).

The MERCOSUR/CAN agreement is important since it will
increase its political strength in the FTAA negotiations. However, problems are
likely to occur within the Latin American trade blocks if the differences
between countries widen, therefore, to accomplish macroeconomic convergence
goals is necessary for the further development of trade agreements and growth
(CAN, 2002).

APEC is seeking to liberalize trade in the Asia-Pacific
region and has set a target of free trade by about 2010 for the developed
nations (USA, Canada), 2015 for the newly industrialized countries (e.g. Chile
and Mexico) and 2020 for the developing countries (Peru) (Bourke, 1998). The
tendency for tariff barriers is to decline or be completely eliminated, while
non-tariffs barriers may expand and have a significant impact in some markets or
market segments. NTB are also declining, and future improvement is likely to
occur from the Agreement on Application of Sanitary and Phytosanitary Measures
(SPS) and Technical Barriers to Trade (TBT) of the WTO.

Impediments to trade such as Certification of forest
products could remain limited to a few markets and a few segments. In the long
term, they could cease to have any significant impact e.g. in the hypothetical
case that all the wood is certified, it would not be a commercial advantage for
the producer anymore. The main factor in any case will be the consumer reaction
to products. Therefore, research in consumer preferences will offer some clues
to answering this question.

12Good and services include the value of all goods and other market services
provided to the rest of the world, including merchandise, freight, insurance,
transport, travel, royalties, license fees, and other non factor services.
Labour and property income (formerly called factor services) is excluded, as are
transfer payments (World Bank, Organisation for Economic Co-operation and
Development, United Nations) (World Bank, 2002).

15Panama is not part of the GATT.16Explained in
point 7.5.3 Trade impediments. 17ITTA signatories
– as producers (1994): Bolivia, Brazil, Colombia, Ecuador, Guyana, Honduras,
Panama, Peru, Suriname and Venezuela.18More information
available at: http://www.wto.or./english/thewto_e/whatis_e/tif_e/agrm3_e.htm.19A tariff is a tax placed on goods imported into a country. A duty is a tax
on imported goods imposed by the customs authority. It is often applied as an ad valorem tax and it is either based upon the value of
the good or the weight or quantity of the good.